It has taken almost a decade for the software industry to absorb all the ramifications of moving from perpetual license pricing to SaaS subscription pricing. The longer payback period for investors, the headaches of high acquisition costs, and the upfront pre-revenue investments in infrastructure being just a few of the issues with which SaaS entrepreneurs and VCs have had to wrestle.
So, why go out on a limb looking for new revenue and higher margins by experimenting with even more unconventional monetization models? Won’t this just make a bad situation worse?

To temporarily borrow a well known trademark, the reason is simple: it’s the network. If there is a common theme emerging from this short list of dos and don’ts then this is it. It’s the network. It’s the Web. SaaS is not software. New business value arises from the characteristic that your software-as-a-service offering, unlike licensed software, can become a network hub that can connect any business entity, user or system it touches to any other: your prospects, your customers, your partners, your customers’ customers, your customers’ vendors, your customers’ partners’ customers, and so on all the way out to the edges of the Web. Given that value is created by the network, it follows that new network-based monetization opportunities are also created. Here is a quick (and very incomplete) list of new monetization opportunities open to software-as-a-service businesses.

Network-enabled services

Advertising

Syndication (content/applications/data)

Benchmarking and market intelligence

Integration

Cloud services

Marketplaces

Revenue models beyond subscriptions

Referral fees

Transaction fees

Consumption-based pricing

Performance-based pricing

Reseller margin

Revenue sharing

The monetization opportunities open to you will depend on many factors, including the nature of your business, the attitudes of your customers and the sophistication of your product. But most importantly, it will depend on your own creativity.

In the first post in this series, I presented a somewhat trick question in the hope that anyone who digested the entire series would have no difficulty coming up with the right answer.

Quiz: What is the most successful enterprise SaaS application to date?
Hint: It’s not Salesforce.com

For those of you who have read all 5 posts in this series, thank you for your patience. And, if you haven’t guessed it already, the answer is…

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When you move your software product online into a software-as-a-service delivery model it enables you to connect the product directly to your customers on the outbound side and directly to your internal systems on the inbound side.

...there is a big difference between making the strategic decision to deliver your product in a hybrid model and stumbling into a hybrid model through tactical mistakes. In the first instance the market requirements demand a hybrid approach, in the second executive management is simply not disciplined and creative enough to avoid it.

What truly distinguishes SaaS from software? How should it be priced, sold and serviced? Is it possible to succeed with a hybrid approach where a vendor offers both SaaS and software versions of a product?

The SaaS Scorecard is designed to help software-as-a-service entrepreneurs and investors evaluate the competitiveness of their businesses relative to licensed software and other SaaS competitors using the principles of SaaS Model Economics 101 and the Top Ten Dos and Don'ts of SaaS Success.

SaaS is not software. New business value arises from the characteristic that your software-as-a-service offering, unlike licensed software, can become a network hub that can connect any business entity, user or system it touches to any other: your prospects, your customers, your partners, your customers’ customers, your customers’ vendors, your customers’ partners’ customers, and so on all the way out to the edges of the Web. Given that value is created by the network, it follows that new network-based monetization opportunities...

Chaotic Flow by Joel York

The goal of this blog is to share knowledge and opinions that will help executives at Internet software companies that create and deliver SaaS and cloud applications critically analyze real-world, go-to-market strategies and tactics by applying sound business principles
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